You & Your Money Class 2, Part 1 – Your Budget

You & Your MoneyClass 2, Part 1 – Your Budget International Center at Catholic Charities Community Services December 2013 Instructor: Virginia Guilford

Class Schedule • Class 1 - Thursday December 5, 3:30 -5 PM • Your Income • Your Taxes • Class 2 – Thursday December 12, 3:30 -5 PM • Your Budget • Your Bank Accounts • Class 3 – Thursday December 19, 3:30 -5 PM • Your Credit • Learning More

Please Be Aware • This course does not give you professional advice • I am not a lawyer. • I am not an accountant. • I am not a banker. • This course explains the basic concepts and vocabulary that you need for understanding work, taxes, budgeting, banking and credit.

Your Attitudes Toward Money Influence of Your Parents • How your parents dealt with money when you were a child can influence how you feel today. • Frugal Parents? • Your Parents Spoiled You? • Charitable Parents? • Your Parents Never Talked About Money? • Your Parents Thought Investing Was Not Safe? • Your Parents Were Extravagant • Your Mother Was Dependent • Your Parents Divorced

Your Attitudes Toward Money Influence of Your Money Personality • Take the Money Personality Quiz • The questions ask what you would do in different situations. • Choose the answer that most closely matches what you would do.

Your Attitudes Toward Money Influence of Your Money Personality • Money Personality Quiz Scoring • Score your answers • Give yourself 2 points for every A answer • Give yourself 1 points for every B answer • Give yourself 0 point for every C answer • Your Money Personality • 14 – 20 points – Shopaholic (emotional, entitled) • 7 – 13 points – Sensible Spender (rational, planner) • 0 – 6 points – Scrooge (stingy, pessimistic)

Your Attitudes Toward MoneyDealing With Your Money Personality • Shopaholic • You spend as much as you can, and you have trouble using your money for savings or to pay down debt. • People from countries that provide more of a ‘safety net’ may not realize the need in the US to save for emergencies, like sickness or job layoffs. • Try to make shopping not your only reward – remember sports and hobbies that you enjoy. • Arrange for automatic payroll savings plans wherever possible – if you don’t have it, you can’t spend it. • Scrooge • You tend to be pessimistic and fearful about the future, and you are reluctant to spend anything more than the minimum necessary. Friends and family may feel neglected and disrespected. • Think about setting aside a specific amount of money that you plan to use for gifts or contributions. That way you won’t feel that these expenses will overwhelm you. • Consider investing some of your savings. If you can see your savings grow, maybe you can become more comfortable spending some of your money. • Sensible Spender • You usually make rational, informed decisions about your money. • Continue learning. Regularly read the personal finance pages in your newspaper, or look at CNN Money or Yahoo Finance. • You, too, should consider investing – a sensible, diversified investment plan can help you fund your retirement.

Your Budget • You will want to make sure that the money you earn will take care of your needs • A budget is a kind of plan that lists your expected income (your net income) and your estimated expenses

Estimating Your Income • Employee with a fixed salary • Monthly or Twice a Month • Every Two Weeks • Scholarships & Grants • Monthly Stipend • Annual Payment • Irregular Income • Paid on Commission – your pay rises and falls, depending on how much you sell. • Paid by the job – your pay rises and falls, depending on how many projects you are hired to do.

Estimating Your Expenses • Write down a list of what you estimate your expenses will be • Review your checkbook • Keep a list for a month • Analyze your Expenses • Fixed Expenses • Flexible Expenses • Required Expenses • Optional Expenses

How to Manage an Irregular Income • “Making Your Nut” • Giving Yourself a Salary

How to Manage an Irregular Income • “Making Your Nut” • Know what your ‘nut’ is – the minimum you need to cover basics • First earn enough to make your ‘nut’ • Then – think about extras • Good if you earn lots of small amounts of money 13

How to Manage an Irregular Income • Giving Yourself a Salary • Know what is a sensible amount for a salary that will cover most of your needs • Put all income into a savings account • Transfer the salary amount each month to your checking account • Good if you get large amounts of money at different times 14

Put Savings First Saving for Emergencies • Enough to cover 6 months basic expenses • Saving for Retirement • Even if you are young, try to put away something. • Use tax advantaged accounts • Saving for a Goal • Decide how much you will need, and when you will need it • Calculate how much you will need to save each pay period to reach your goal

You & Your MoneyClass 2, Part 2 – Your Bank Accounts International Center at Catholic Charities Community Services December 2013 Instructor: Virginia Guilford

Kinds of Banks • There are different kinds of banks • Commercial Banks • Savings Banks • Credit Unions • Internet Banks • In earlier times, each different type of bank was only allowed to provide a specific kind of bank service. But now, most types of banks can do all the same basic things.

Choosing Your Bank • Convenience • Branches /ATMs located near your home or work place • International branches. • Open at convenient times for you • Services • Offers the kind of bank accounts you need • Safe online banking that is easy to use • Fees • Reasonable fees compared to other banks. Verify at “Find A Better Bank” (www.findabetterbank.com)

FDIC Protection • The Federal Deposit Insurance Corp (FDIC) protects against the loss of deposited money if an FDIC-insured institution fails • Does cover funds in checking accounts, savings accounts, money market accounts, and CDs • Does not cover stocks, bonds, mutual funds, life insurance, annuities or municipal securities • Most commercial banks, savings banks and credit unions will post signs indicating that they are FDIC-insured

Kinds of Accounts & Bank Offerings Checking Accounts Savings Accounts CDs Money Market Accounts Tax-Advantaged Accounts 20

Checking Accounts • Checking Accounts • Allows you to take money out whenever you want • Money can be withdrawn by using a check, or an ATM/Debit card • Some checking accounts also pay interest on money in the account 21

Savings Accounts • Savings Accounts • Allows you to take out money whenever you want • Money can be withdrawn by a visit to the branch, or with an ATM/Debit card • Savings accounts pay a small amount of interest on the money left in the account 22

CDs CD (Certificate of Deposit) • You agree not to take out the money for specified amount of time • CDs have maturity dates that range from 3 months to 5 years or more • CDs usually pay a higher amount of interest than savings accounts • CDs in higher amounts, with longer maturity dates pay more interest 23

Money Market Accounts Money Market Accounts • A MMA is an FDIC-insured deposit account • Pays slightly higher interest rates • Usually has a minimum balance • Usually limits the number of withdrawals • Not the same as a Money Market Fund (MMF) • An MMF is a kind of mutual fund • An MMF is not FDIC insured 24

Tax-Advantaged Accounts Tax-Advantaged Accounts • Federal & State tax laws allow you to shelter some income from income tax • IRA Retirement Account • ROTH IRA Retirement Account • HSA Health Savings Account • ESA Coverdell Education Savings Account • Most banks and brokerage firms offer tax-advantaged accounts

Access to your Bank Accounts • Deposits • Withdrawals at the Bank Branch • ATM Withdrawals • Debit Card Withdrawals • Check Payments • Certified Checks

Access to your Bank Accounts • Deposits of cash or checks • Deposit Ticket • ATM deposit • Smart phone deposit (checks only) • Direct Deposit • Employer • Tax refunds 27

Access to your Bank Accounts • Withdrawals at the Bank Branch • Most easily done at your own branch (where you opened your account) • Your own branch will have your signature on file • You may be personally known to someone at the branch • Give the teller a check written on your account made out to ‘cash’ 28

Access to your Bank Accounts ATM Withdrawals • Bank-provided ATM card • Debit card • Avoid out-of-network ATMs 29

Electronic Access – Debit Card • Debit Card Withdrawals • A bank card that allows the cost of purchases to be immediately deducted from your bank account • Not a credit card – you must have the money in your account when you use it. • May be used for withdrawing cash from the ATM 30

Access to your Bank Accounts • Checks • Blank checks may be free, or there may be a small charge • The ‘Float’ is the time between when you write the check and when the money leaves your account. 31

Access to your Bank Accounts Certified Checks • Large purchases (car, down payment) may require payment with a certified check • A check that is guaranteed by the bank • Must be requested at the branch • Bank verifies that you have enough money to cover the certified check • Bank ‘freezes’ that amount of money in your account • No ‘float’ time between when you write the check and when the money comes out of your account

Electronic Access to your Bank Accounts • On-Line Banking • Approved Automated Withdrawals / ACH Debit

Electronic Access – On-line Banking • On-Line Banking • Check your balance • Pay bills • Transfer money • Is It Safe? • Most banks offer secure Internet banking • https – indicates the connection is secured by encryption • Internet security is a complicated issue • Be cautious • Be careful 34

Electronic Access - ACH Debit • Approved Automated Withdrawals / ACH Debit • Only for limited amounts and limited time • Only from trustworthy companies • Companies that you know well • Companies that you would not have trouble with if you wanted to change or cancel your payment • YES for major utilities, public colleges/universities, government offices • NO for private profit-based schools, small companies in other countries 35

Special Banking Services • Wire Transfers • Money is sent electronically from one bank account to another • Often used for international transfers of money • Wire transfers use networks like CHIPS (Clearing House Interbank Payments System) or Fedwire (the Federal Reserve Banks network)

Special Banking Services • Overdraft Protection • A check is ‘bounced’ when you don’t have enough money in your account to pay it • Banks may charge high fees if a check bounces – as much as $20 or $30 • Overdraft protection is offered at some banks. The bank gives you an automatic loan if you don’t have enough money to cover a check you wrote. • Look carefully at any overdraft protection • How much will it cost? • Is there a charge only if you use it or is there a monthly charge? 37

Special Banking Services • Stop Payment Orders • If a check you have written is lost or stolen, or if you don’t want to pay it for some other reason, you can put a ‘stop payment’ order on that check • Check payee • Check amount • Check date • Check number • A fee may be charge for a stop payment order • The stop payment order may only be good for a specific amount of time – for example 6 months

Special Banking Services Automatic Transfers • You can set up a regular, automatic transfer that will happen on the same day, at regular intervals • Once a month • On your payday • If you have online banking, you can set up a regular transfer through your online interface • You can also ask the bank to do make the transfer for you 39

You & Your Money Glossary Contains simple definitions of the most commonly used financial terms. Log on to www.virginiaguilford.com and download the Word document from the “Docs and Links” page. (The PowerPoint presentations used in this class are also available there) Or send your request to vg@virginiaguilford.com 40

You & Your Money Class 2, Part 1 – Your Budget